Written by Nikolaus von Twickel
Summary
Amid fresh international sabre rattling over Donbas, Moscow and the separatists took new measures to seemingly bolster the economy (or save it from ruin), most notably with a Kremlin decree that allows the “People’s Republics” to trade freely with Russia. Meanwhile, the pandemic continued to take lives while a growing brain drain raised depopulation fears.
Putin decrees a customs union with Donetsk and Luhansk
In a decree published on 15 November President Vladimir Putin ordered the Russian government to treat products from “Certain areas of Ukraine’s Donetsk and Luhansk regions” (i.e. the “People’s Republics”) as Russian products and to recognize local product certificates, thus de facto annexing them to the Russian-led customs union.
It was unclear, however, how much this could improve the ongoing economic depression in the “People’s Republics”. While “DNR” leader Denis Pushilin claimed that the move would create jobs, independent observers argued that this will just legalize trade already happening – whereby products (typically coal and steel) were quietly re-classified as Russian after crossing the border from Ukraine. “DNR” economic development “minister” Alexei Polovyan said on 17 November that some 60 per cent of local production is already exported – i.e. to Russia, because due to geography and the trade blockade with Ukraine the “republics” cannot export to any other destination.
However, the decree came just two weeks after Russia banned exports of anthracite coal to Ukraine – a move that itself has been explained as retaliation for the Ukrainian Bayraktar combat drone attack inside the “DNR” on 25 October (see Newsletter 96). Thus, one of the most profitable goods from the “Republics” – especially with the current energy price hike – cannot be shipped to where it is most in demand (some of Ukraine’s biggest power plants require anthracite coal). Coal and steel from Donbas were in the past not welcomed by Russian producers, who feared cheap competition (Russia is a net exporter of coal).
Kyiv-based journalist Andrii Dikhtarenko pointed out that – with the exception of coal – lingering quality problems, raw material shortages and difficult logistics make it very hard to sell local products in Russia. Dikhtarenko speculated that the Kremlin decree might rather prompt “grey imports” from Ukraine to get to Russia via the “People’s Republics”. Moscow-based Ukrainian expert Konstantin Skorkin suggested that the main gain may be political – that Moscow was more and more recognizing the “Republics” as subjects.
Pashkov a victim of swap from Kurchenko to Yurchenko?
The Kremlin decree comes weeks after Donetsk and Luhansk declared the abolition of customs and tariffs and the creation of a single economic space within the two “People’s Republics” – a move clearly coordinated by Moscow (see Newsletter 95). Despite doubts about their immediate benefits, both moves are likely part of a Kremlin effort to reduce the payment of subsidies – up to 80 per cent of the “republic’s” budgets are thought to be covered by Russia – by improving long-term economic conditions for Donbas – assuming that the current status quo remains.
Clear evidence of this has been the change of Moscow’s industrial policy for the region, which likely brings key plants under direct Kremlin control. In July, Yevgeny Yurchenko, a hitherto little-known Russian businessman, was presented as the new “investor” who had bought key Vneshtorgservis plants (see Newsletter 90). Yurchenko, who is widely believed to be a front man for the Kremlin, claimed in October that he is the sole owner and operator of the seven plants. He also announced that he wants to open a new bank in the “republics”.
Yurchenko’s holding was renamed Yuzhny gorno-metallichesky complex (southern mining and metals complex) – known by its Russian acronym as YuGMK. The demise of Vneshtorgservis was epitomized by the sacking of its former CEO Vladimir Pashkov as deputy “Prime Minister” on 11 November. Pashkov, a Russian citizen and form deputy governor of the Siberian Irkutsk region, was thought to be a powerbroker since his promotion into the “government” in 2019 (see Newsletter 55). There was no replacement for him at the time of publication.
Vneshtorgervis was plagued by financial difficulties, leaving workers for months without pay, which led to strikes and a growing exodus of skilled professionals. Registered in the Georgian breakaway region of South Ossetia, the holding was thought to be run by Moscow-based Ukrainian businessman Serhiy Kurchenko. This in turn prompted speculation that Moscow handed the most profitable industrial assets seized from Ukrainian owners in 2017 to the clique of deposed president Viktor Yanukovych, to whom Kurchenko was a close associate.
Signs of worsening brain drain
While it remains to be seen how much these measures will reduce the need for Russian subsidies, the urgent need for economic recovery was exemplified in fresh signs of a growing brain drain. Worst hit was the health sector, where underpaid doctors and nurses are struggling under the massive onslaught of the COVID-pandemic. Deputy labour “minister” Denis Strelchenko said on 3 November that the “DNR” was missing 2,154 health workers – including 1,200 doctors. He added that labour shortages were also serious in the construction and metals sectors and for public transport.
In October, former Donetsk health “minister” Olga Dolgoshapko warned that with a rate of natural population increase of minus 11.9, the “DNR” is losing more people than any other country in Europe and will be completely depopulated in 95 years, if the trend is not reversed (see Newsletter 96).
Average wages in Donetsk are about 10,000 roubles (119 euros) a month, roughly a fourth of that in the neighbouring Russian region of Rostov-on-Don, according to a Radio Liberty report from June. A video report by the Ukrainian “Realnaya Gazeta” newspaper also stressed that the mass issuing of Russian passports is taking its toll, because it enables people to move to Russia for work without administrative hurdles.
“Republican” Passports become obligatory for state jobs
More than 600,000 Russian passports have been issued to locals under a fast-track scheme introduced by the Kremlin in 2019, Russian Duma deputy Viktor Vodolatsky said in July. Moreover, some 1.42 million people have received “republican”, i.e. locally issued passports, according to a 19 November statement by Ukraine’s ombudswoman Lyudmyla Denisova. She warned that the separatists continued to introduce measures that force people to take such passports.
Thus, the “DNR” said on 11 November that from 2022, only holders of “republican” passports will be allowed to hold state jobs. Denisova criticized that this was a breach of the 4th Geneva Convention and of its 1977 Protocol I. Possession of a “republican” passport is also a prerequisite for obtaining Russian citizenship. The combined population of both “People’s Republics” is thought to be 1.8 million – 1.1 in the “DNR” and 0.7 in the “LNR” (see Newsletter 83).
COVID keeps killing
Meanwhile, the coronavirus pandemic continued severely, even according to official figures. The “DNR” reported a weekly death toll of 331 in the week up to 22 November and 385 and 362 in the two weeks before. In the last three weeks of October, these figures were 459, 381 and 471, according to the health “ministry’s” Telegram channel.
As of 24 November, the “DNR” reported a total of 104,492 and 7,922 deaths. Assuming a total population of 1.1 million, this translates into 7,201 deaths per million – far higher than the 4,010 per million recorded in Bulgaria, Europe’s worst hit country, according to ourworldindata.org.
The “LNR” reported 171 deaths up to 14 November and 178 in the week before. However, this was a fall from 263, 275 and a record 407 fatalities in the three weeks of October, prompting the separatists to lift some restrictions on public life. Thus, on 9 November the “LNR” allowed banyas to reopen.
While the separatist COVID-figures seem dubiously stable (in most other countries, figures surge up only to come down again), they do reflect the severity of the situation when compared over time. Independent reports from Donetsk and Luhansk also paint a bleak picture. A series of personal stories compiled by and broadcast on Youtube by the Ukrainian “Novosti Donbassa” outlet on 20 November suggests that patients are largely left alone while the health sector can barely cope with the continued onslaught.
The “People’s Republics” are especially vulnerable to the pandemic because of an overaged population, low vaccination rates and vaccine shortages. The “DNR” health ministry said on 24 November that 173,000 people have been vaccinated with Sputnik light, which is simply the first component of the Russian Sputnik V vaccine. On 25 November, a Russian convoy was supposed to bring another 250,000 doses to Donetsk.
Realnaya Gazeta reported in October that the “DNR” had vaccinated 225,000 people by late August, 20 per cent of a population of 1.1 million (see Newsletter 96). This means that just 52,000 people received the two-component vaccine Sputnik V, which offers better protection.
Ukraine offers vaccinations to citizens from non-government-controlled areas, but numbers have been low so far, not least because of the closure of most crossing points under the pretext of the pandemic. Ukraine said that of 1 November some 8,200 citizens from Donbas and Russian-annexed Crimea took up the offer.
No mention of “Wagnergate”
None of the separatist-controlled media outlets mentioned the sensational Bellingcat report published on 17 November, according to which the group of Russian mercenaries that was stranded in Belarus in July 2020 were the objects of a sting operation by Ukrainian intelligence agencies (aborted last minute), who wanted to lure former Donbas fighters to Ukraine and put them on trial. Separatist outlets have regularly in the past spread unfounded stories about alleged mercenaries from Western Private Military Companies fighting in Donbas.
